Invoice factoring — many small businesses turn to invoice factoring as a way of improving their cash flow. Invoice factoring involves selling your accounts receivable to another company. For example, you may receive 80% of the invoice value — the factoring company gambles that they’ll be able to collect on 100%.
Benefits of invoice factoring
Depending on the terms of your contract, the factoring company will pay you upfront, assume the risk of bad debt, handle invoice processing, deposit checks, enter payments and write up reports.
If you start using invoice factoring, you won’t have to worry about giving your clients early payment discounts. You can ask for lower deposit amounts, because you’ll get money from the factoring company right away. Invoice factoring sounds like a great way to improve your business’s viability without increasing your risk.
By the way, sometimes the format of your invoice may be the problem. Check out our sample template to see if yours is up to snuff.